Gestamp Automoción S A : 9M 2024 Interim Results

About this update from Gestamp Automocion S.a.

Management Discussion and Analysis of the Financial Condition and Results of Operations for the nine months period ended September 30, 2024 Gestamp Automoción, S.A. November 5 th , 2024 9M 2024 Management Report Index 1. LEGAL NOTICE IN RELATION TO THE PRESENTATION OF FINANCIAL AND OTHER INFORMATION 3 1.1. Financial information and operational data 3 1.2. Industry data 3 1.3. Forward looking statements and other qualifications 4 2. BUSINESS PERFORMANCE UPDATE 5 3. FINANCIAL PERFORMANCE FOR THE PERIOD 7 3.1. Revenues 7 3.2. Operating expenses 7 3.3. EBITDA 8 3.4. Operating result 8 3.5. Financial result 8 3.6. Exchange differences 8 3.7. Income tax expense 8 3.8. Result attributable to non-controlling interests 8 4. FINANCIAL INFORMATION BY GEOGRAPHIC SEGMENT 9 4.1. Revenues & EBITDA 9 5. INFORMATION ON CASH FLOW STATEMENT 9 5.1. Cash flow from operating activities 13 5.2. Working capital 13 5.3. Cash flow used in investing activities 13 5.4. Cash flow from financing activities 13 6. INVESTMENTS IN FIXED ASSETS 14 7. INFORMATION ON CONSOLIDATED BALANCE SHEET 15 7.1. Liquidity 16 8. OTHER RELEVANT FINANCIAL DATA 17 2 9M 2024 Management Report 1. LEGAL NOTICE IN RELATION TO THE PRESENTATION OF FINANCIAL AND OTHER INFORMATION 1.1. Financial information and operational data Unless otherwise indicated, all financial information in this report has been prepared in accordance with IFRS applicable at the relevant date and is presented in Euros. IFRS differs in certain significant respects from generally accepted accounting principles in the US. In this sense, certain information presented in this report has not been prepared in accordance with IFRS or any other accounting standards and also contains alternative performance measures (" APM ") as defined in the Guidelines on Alternative Performance Measures published by the European Securities and Markets Authority (ESMA) on October 5, 2015 1 . As used in this report, this information includes "EBITDA", which represents operating profit before amortization, impairment and depreciation. This report also contains other measures such as: cash, cash equivalent and current financial assets, total financial debt and net financial debt, growth at constant exchange rates, and capex split by categories. We present these non- IFRS measures because we believe those indicators and similar measures are widely used by certain investors, securities analysts and other interested parties as supplemental measures of performance and liquidity. In particular, we believe that EBITDA is meaningful for investors because it provides an analysis of our operating results, profitability and ability to service debt and because EBITDA is used by our chief operating decision makers to track our business evolution, establish operational and strategic targets and make important business decisions. To facilitate the analysis of our operations, this indicator excludes amortization, impairment and depreciation expenses from operating profit in order to eliminate the impact of general long-term capital investment. Although we are presenting this measure to enhance the understanding of our historical operating performance, EBITDA should not be considered an alternative to operating profit as an indicator of our operating performance, or an alternative to cash flows from operating activities as a measure of our liquidity. Growth at constant exchange rates is a numerical translation of our figures from local currencies to euros, and not a description of the situation if the currencies had not moved, as this could have had some other implications on the economy and our business situation and contracts. Capex split in categories is a management judgement, and should not be considered as a substitute for additions of tangible and intangible assets, nor depreciation and amortization. The presentation of these measures is not intended to and does not comply with the reporting requirements of the SEC; compliance with its requirements would require us to make changes to the presentation of this information. Rounding adjustments have been made in calculating some of the financial information included in this report. Figures shown as totals in some tables and elsewhere may not be exact arithmetic aggregations of the figures that precede them. 1 In this regard, a breakdown of the explanations, definitions and reconciliations of the APMs used in this report can be found, as applicable, in Note 4.6. of the Notes to the Consolidated Financial Statements of the Gestamp Group as of December 31, 2023, in the relevant results presentation and also in this report, all of them available both on Gestamp's corporate website ( https://gestamp.com/Investors-Shareholders/Economic-Financial-information) and on the website of the National Securities Market Commission (Comisión Nacional del Mercado de Valores) (www.cnmv.es). 3 9M 2024 Management Report 1.2. Industry data In this report, we may rely on and refer to information regarding our business and the market in which we operate and compete in. We have obtained this information from various third party sources, including providers of industry data, discussions with our customers and our own internal estimates. We cannot assure that any of this information is accurate or correctly reflects our position in the industry, and none of our internal surveys or information has been verified by any independent sources. We do not make any representation or warranty as to the accuracy or completeness of any such information set forth in this report. 1.3. Forward looking statements and other qualifications The following discussion and analysis is based on and should be read in conjunction with our historical financials included elsewhere in this quarterly report. Certain capitalized terms used herein have the meaning set out in the offering memorandum for our senior secured notes due 2026. The discussion includes forward looking statements, which, although based on assumptions that we consider reasonable, are subject to risks and uncertainties, which could cause actual events or conditions to differ materially from those implied herein. Please be cautioned not to place undue reliance on these forward looking statements. These forward statements are made as of the date of this report and are not intended to give any assurance as to future results. 4 9M 2024 Management Report 2. BUSINESS PERFORMANCE UPDATE According to the International Monetary Fund (IMF World Economic Outlook (WEO) as of October 2024) global GDP growth will be at +3.2% YoY for 2024 unchanged from the July 2024 WEO projections). The pace of the economy expansion remains stagnant and below historical average as there is still uncertainty arising from: i) geopolitical tensions from the war in Ukraine and the conflict in Gaza, with its inherent risk of higher global energy and oil prices; ii) the divergence in disinflation speed across major economies and its effect on monetary policies, and iii) the possibility of an intensification of protectionist policies that would exacerbate trade tensions. As for 2025, the IMF has revised its global GDP growth forecast slightly downwards to +3.2% (-0.1 percentage points lower than the July 2024 WEO projections at +3.3% YoY). Within the auto sector, S&P Global Mobility (former IHS) forecasts production volumes for the year to decrease by -2.2% to 88.5 million vehicles (IHS geographies as of October 2024), below (-1.8%) the 90.0 million vehicles for 2024 estimated in February. Over the past nine months S&P Global Mobility has been making several cuts to its full-year volume projections and expects 2024 to be a transition year in terms of global light vehicle production following an extraordinary growth in 2023 and within a context of a progressive recovery of 2017 peak levels at 95.1 million vehicles. Market production volumes are now expected to be back at peak levels by 2028. During the first nine months of 2024 the auto sector has seen a slight decrease in production volumes in Gestamp's footprint of -0.6% YoY (according to S&P Global Mobility as of October 2024). During the period, we have seen volumes decreasing in Western Europe (-3.1% YoY), Mercosur (-0.8% YoY) and Asia (-0.7% YoY). Contrary, Eastern Europe has been the strongest performing region in the period with a rise in volumes of +2.0% YoY, followed by NAFTA with an increase of +0.9% YoY. In the third quarter of 2024, production volumes in Gestamp's footprint have fallen by -2.8% YoY, with Mercosur being the only region with volume growth (+10.4% YoY). All other regions have recorded declines in the quarter: Eastern Europe (-5.7%), Asia (-3.8%), NAFTA (-2%), and Western Europe (-0.7%). In this context, Gestamp has seen revenues in the first nine months decreasing by -1.6% YoY to €8,926.8 million, which includes a €435.3 million contribution from Gescrap. Auto revenues (excluding Gescrap) have decreased by -1.1% YoY mainly due to a tough comparable figure and the negative impact of the exchange rates. On a constant currency basis, this growth implies an outperformance to the market of 6.3 percentage points (against Gestamp's footprint - IHS data as of October 2024), or 6.7 percentage points on a weighted basis. With regards to profitability, EBITDA in absolute terms decreased by -7.4% YoY in the nine months of 2024, reaching €935.5 million. In terms of EBITDA margin, the Auto Business has achieved a 10.6% (or 10.7% if we exclude the €16.8 million costs related to Phoenix Plan in 9M 2024), which is below our target for the full year due to: i) volumes volatility, ii) seasonality, iii) tough comparable figures, and iv) persistent inflationary pressures. As for Gescrap, EBITDA margin in the first nine months of 2024 has reached an 8.5%. Looking at the short term and taking into account that the outlook remains extremely challenging due to: a) declines in production volumes; b) uncertainty and volatility in Europe given the slowdown in electric vehicle penetration and c) extraordinarily negative currency fluctuation, Gestamp has updated its 2024 guidance to reflect lower growth and, consequently, lower operating leverage and lower free cash flow generation. These new targets are as follows: i) revenues for the Auto business exceeding the growth of market 5 9M 2024 Management Report production volumes in the low single digit range with a slightly lower reported EBITDA margin compared to 2023; ii) for Gescrap, the Group expects similar revenues and EBITDA in 2024 compared to 2023; iii) positive free cash flow (defined as reduction of Net Debt excluding acquisitions and dividends) and iv) a net debt to EBITDA ratio in the 1.7x range. Going forward, Gestamp's main focus is to deliver on its long term targets for 2027 presented on the Capital Markets Day in June 2023, which are based on the following key pillars: growth ambition; ii) being a trusted partner to its clients; iii) using its technology and innovation capabilities to be differential; iv) keep improving the operational excellence, in order to v) grow in a profitable way; vi) maintain a disciplined balance sheet profile; and vii) lead the circular economy in the automotive sector. 6 9M 2024 Management Report 3. FINANCIAL PERFORMANCE FOR THE PERIOD Third Quarter YTD September 30, 2023 2024 % Change 2023 2024 % Change Consolidated Income Statement Data (Millions of Euros) (Millions of Euros) Operating income 2,856.0 2,828.5 -1.0% 9,221.9 9,084.6 -1.5% Revenue 2,798.5 2,787.3 -0.4% 9,071.6 8,926.8 -1.6% Other operating income 39.9 33.8 -15.3% 112.9 115.0 1.9% Changes in inventories 17.6 7.4 -58.0% 37.4 42.8 14.4% Operating expenses -2,545.0 -2,534.9 -0.4% -8,211.1 -8,149.1 -0.8% Raw materials and other consumables -1,793.0 -1,728.9 -3.6% -5,833.4 -5,633.3 -3.4% Personnel expenses -420.1 -455.9 8.5% -1,347.4 -1,461.0 8.4% Other operating expenses -331.9 -350.1 5.5% -1,030.3 -1,054.8 2.4% EBITDA 311.0 293.6 -5.6% 1,010.8 935.5 -7.4% Depreciation, amortization and impairment losses -168.6 -173.4 2.8% -504.1 -530.1 5.2% Operating profit 142.4 120.2 -15.6% 506.7 405.4 -20.0% Finance income 6.3 6.5 3.2% 17.7 18.2 2.8% Finance expenses -57.4 -54.5 -5.1% -173.4 -164.8 -5.0% Exchange gains (losses) 3.5 -20.9 -697.1% -48.7 -33.8 -30.6% Other 0.4 5.4 1250.0% 26.5 24.3 -8.3% Profit from continuing operations 95.2 56.7 -40.4% 328.8 249.3 -24.2% Income tax expense -21.2 -15.4 -27.4% -76.1 -59.7 -21.6% Profit for the period 74.0 41.3 -44.2% 252.7 189.6 -25.0% Profit (loss) attributable to non-controlling interests -11.0 -20.4 85.5% -27.4 -62.8 129.2% Profit attributable to equity holders of the parent 63.0 20.9 -66.8% 225.3 126.8 -43.7% 3.1. Revenues During the third quarter of 2024, revenues reached €2,787.3 million, of which Body-in-White and Chassis represented €2,323.4 million, Mechanisms €271.2 million, Gescrap €118.7 million and Tooling and others €74.0 million. Revenues in the third quarter of 2024 decreased by €11.2 million or -0.4% to €2,787.3 million versus €2,798.5 million in the third quarter of 2023. The level of activity, considered as the net value of revenue plus change in inventories less consumables, amounted to €1,065.8 million in the third quarter of 2024 compared to €1,023.1 million in the third quarter of 2023, an increase of €42.7 million or 4.2%. 3.2. Operating expenses Raw materials and other consumables . Expenses related to raw materials and other consumables decreased by €64.1 million, or -3.6%, to €1,728.9 million in the third quarter of 2024, compared to €1,793.6 million for the same period of 2023. This decrease is in line with the decrease in revenues taking into account the specific weight of raw materials in total revenues. Personnel expenses . Personnel expenses increased by €35.8 million, or 8.5% for the third quarter of 2024 to €455.9 million from €420.1 million for the same period in 2023 mainly affected by inflationary pressures in certain geographical areas. Other operating expenses . Other operating expenses increased by €18.2 million, or 5.5%, to €350.1 million in the third quarter of 2024 from €331.9 million for the same period of 2023. 7 9M 2024 Management Report 3.3. EBITDA EBITDA for the third quarter of 2024 reached €293.6 million, representing a decrease of €17.5 million from €311.1 million for the same period in 2023 due to, as it has been mentioned above, volumes volatility, seasonality, tough comparable figures, and persistent inflationary pressures. Depreciation, amortization and impairment losses . Depreciation expense increased by €4.8 million, or 2.8%, to €173.4 million in the third quarter of 2024 versus €168.6 million in the same period in 2023 mainly due to the provision corresponding to the assets that came into operation during the last quarter of fiscal year 2023. 3.4. Operating result The operating result reached €120.2 million in the third quarter of 2024 versus €142.5 million for the same period in 2023, representing a decrease of €22.3 million. This decrease was mainly due to lower EBITDA and higher depreciation and amortization. 3.5. Financial result Net financial expenses for the third quarter of 2024 decreased by €3.1 million, to €48.0 million versus €51.1 million for the same period in 2023. 3.6. Exchange differences Exchange gains amounted to €20.9 million in the third quarter of 2024 versus gains of €3.5 million for the same period in 2023. Exchange gains in Q3 2024 were mainly recorded in Mexico and Turkey. 3.7. Income tax expense The tax expense was €15.4 million in the third quarter of 2024, which implies a decrease of €5.7 million compared to €21.1 million expenses for the same period in 2023. Effective tax rate for the period was 27.2%. 3.8. Result attributable to non-controlling interests Result attributable to non-controlling interests for the third quarter of 2024 implied a negative impact of €20.4 million. The gains attributable to non-controlling interests in the third quarter of 2024 is consistent with the result of gains in those operations in which the group has non- controlling interests. 8 9M 2024 Management Report 4. FINANCIAL INFORMATION BY GEOGRAPHIC SEGMENT 4.1. Revenues & EBITDA Third Quarter YTD September 30, 2023 2024 % Change 2023 2024 % Change Revenues (Millions of Euros) (Millions of Euros) Western Europe 963.9 953.8 -1.0% 3,456.1 3,157.5 -8.6% Eastern Europe 387.8 390.0 0.6% 1,256.1 1,337.6 6.5% NAFTA 596.8 569.6 -4.6% 1,802.6 1,863.6 3.4% Mercosur 249.2 251.6 1.0% 722.3 674.1 -6.7% Asia 469.0 503.7 7.4% 1,351.9 1,458.7 7.9% Gescrap 131.8 118.6 -10.0% 482.6 435.3 -9.8% Total 2,798.5 2,787.3 -0.4% 9,071.6 8,926.8 -1.6% Third Quarter YTD September 30, 2023 2024 % Change 2023 2024 % Change EBITDA (Millions of Euros) (Millions of Euros) Western Europe 114.7 101.3 -11.7% 397.6 340.6 -14.3% Eastern Europe 50.6 53.8 6.3% 177.1 171.7 -3.0% NAFTA 42.0 26.3 -37.4% 135.5 100.2 -26.1% Mercosur 27.5 28.4 3.3% 88.4 73.6 -16.7% Asia 66.0 73.6 11.5% 176.1 212.4 20.6% Gescrap 10.3 10.2 -1.0% 36.2 37.0 2.2% Total 311.1 293.6 -5.6% 1,010.9 935.5 -7.5% Western Europe During the first nine months of the year, Auto revenues in Western Europe reached €3,157.5 million, a decrease of €298.6 million, or -8.6% (-8.9% at constant FX) versus 9M 2023. The decrease is partly explained by light vehicle production volumes decreasing in the region by - 3.1% (S&P Global Mobility data as of October 2024 for Gestamp's footprint) together with the decrease in raw materials price. EBITDA reached 340.6 million in the region, a decrease of - €57.0 million, or -14.3% versus 9M 2023, with an EBITDA margin of 10.8% In the quarter alone, revenues reached €953.8 million, a decrease of €10.1 million, or -1.0% (- -1.3% at constant FX) versus Q3 2023. EBITDA in the quarter fell to €101.3 million, implying a decrease of -€13.4 million, or -11.7% versus Q3 2023. This leads into an EBITDA margin of 10.6% in the third quarter of the year, below the 11.9% reported in Q3 2023. Eastern Europe During the first nine months of 2024, Auto revenues saw an increase of €81.5 million, or +6.5% (+22.1% at constant FX) versus the first nine months of 2023, reaching €1,337.6 million. EBITDA in Eastern Europe reached €171.7 million during the first nine months of 2024, resulting in a - 3.0% drop or a decrease of -€5.4 million when compared to the same period of 2023, which implies a 12.8% EBITDA margin for the period. Revenues in Q3 2024 increased by €2.2 million, or +0.6% (+1.5% at constant FX) versus the third quarter of 2023, reaching €390.0 million. The region experienced FX headwinds, mainly in Turkey which impacts negatively our results. 9 9M 2024 Management Report In the quarter, EBITDA reached €53.8 million, resulting in a +6.3% increase when compared to the third quarter of 2023. EBITDA margin has reached 13.8% in the quarter. NAFTA In 9M 2024, NAFTA reported revenues increase of €61.0 million, or +3.4% (+3.6% at constant FX) versus the same period of the previous year, reaching €1,863.6 million. EBITDA in NAFTA reached €100.2 million in 9M 2024, with a decrease of -26.1% or -€35.3 million when compared to 9M 2023 and an EBITDA margin of 5.4%. Revenues in Q3 2024 decreased by -€27.2 million, or -4.6% (-0.5% at constant FX) when compared to Q3 2023, reaching €569.6 million. During Q3 2024, EBITDA in the region reached €26.3 million, a decrease of -€15.7 million or -37.4% when compared to Q3 2023. In the third quarter of 2024, EBITDA margin in NAFTA reached a 4.6%. Mercosur Auto revenues in Mercosur amounted to €674.1 million in 9M 2024, a decrease of -€48.2 million or -6.7% (+42.5% at constant FX) from €722.3 million in 9M 2023. EBITDA fell to €73.6 million during the first nine months of 2024, a decrease of -€14.8 million from €88.4 million in the first nine months of 2023. EBITDA margin stood at 10.9% in the period. During the third quarter, revenues in the region increased by €2.4 million, or +1.0% (+64.6% at constant FX) versus Q3 2023, reaching €251.6 million. FX headwinds in Argentina have negatively impacted our results. EBITDA in Q3 2024 reached €28.4 million, an increase of €0.9 million versus the €27.5 million from the third quarter of 2023. EBITDA margin in the region reached an 11.3% in the quarter. Asia During the first nine months of 2024, revenues reached €1,458.7 million, an increase of €106.8 million, or +7.9% (+10.9% at constant FX) versus 9M 2023. In 9M 2024 EBITDA in Asia reached €212.4 million, a +20.6% increase or €36.3 million when compared to the €176.1 million reported in 9M 2023. EBITDA margin in the region was 14.6% in the period. During Q3 2024, revenues reached €503.7 million, implying an increase of €34.7 million, or +7.4% (+7.9% at constant FX) versus the third quarter of 2023 EBITDA in the quarter at €73.6 million implied an increase of €7.6 million or +11.5% versus the €66.0 million seen in Q3 2023, leading to an EBITDA margin of 14.6%. Gescrap For the first nine months of the year, Gescrap reached €435.3 million revenues and €37.0 million EBITDA, with an EBITDA margin of 8.5%. During the third quarter of 2024, Gescrap's revenues amounted to €118.6 million, a decrease of -€13.2 million, or -10.0%, compared to the third quarter of 2023. 10

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